BIR Ruling [DA-462-03]

December 5, 2003 BIR RULING [DA-462-03] Sec. 97 028-01 Picazo Buyco Tan Fider & Santos 17th19th Floors, Liberty Center 104 H.V. dela Costa Street Salcedo Village Makati City Attention: Atty . Mark O . Vergara and Atty . Rosalia S . Bartolome-Alejo Gentlemen : This refers to your letter dated January 8, 2003 requesting on behalf of your client, Citibank N.A. Philippine Branch (Citibank), for a ruling that the BIR interposes no objection to the transfer of the amount of P1,000,000.00 from Citibank to Landbank of the Philippines (Landbank) by virtue of the Court Order issued by the Probate Court in Special Proceedings No. 02-104387 entitled "In Re Settlement of the Intestate Estate of Jose "Pepito" T. Pion" despite the prohibition under Section 97 of the Tax Code of 1997. It is represented that on November 25, 2002, Citibank received the Order dated November 22, 2002 directing it to release the amount of P1,000,000.00 to the administrators of the estate of the late Jose T. Pion for the purpose of defraying the expenses of the administrators in prosecuting certain cases involving the recovery of certain properties of the decedent, more particularly, for the payment of lawyer's fees; that it appears from the Order dated November 22, 2002 of the Court that Messrs. Antonio T. Pion and Antonio M. Sandico were previously appointed by the Court as Administrator and Co-Administrator of the said estate; that since Citibank was not a party to the estate proceedings, it had to first determine the authenticity of the said Order of November 22, 2002, as well as the authority of the persons representing themselves as administrators of the estate of the late Jose T. Pion; that under its internal guidelines involving withdrawal of funds by deceased depositors, Citibank requires among others, that the heirs of the decedent should present the estate tax return as well as a certification from the Commissioner of Internal Revenue that the estate taxes have been duly paid in compliance with Section 97 of the Tax Code of 1997; that the administrators of the estate of the late Jose T. Pion were so informed by Citibank of the process of authentication and of the guidelines for withdrawal of funds; that the administrators of the estate insisted on the withdrawal on the basis of the Order dated November 22, 2002; that Citibank was thus compelled to refer the matter to its external counsel; that before the external counsel could act on the matter, Citibank received on December 13, 2002, a Manifestation and Motion to cite Citibank for Contempt of Court filed by Atty. Raymundo G. Hipolito III, counsel of the Administrator, Mr. Antonio T. Pion; that said Manifestation and Motion was set for hearing on December 17, 2002 where the Court made it clear to Citibank that the latter must immediately release the amount of P1,000,000.00 to the administrators of the estate within 2 days from said hearing, or not later than December 19, 2002; that on the same date, the Court issued an Order reiterating its previous order to immediately release the said amount maintaining that Section 97 of the Tax Code of 1997 pertains only to extra-judicial settlement of estate where the administrator needs the authorization from the Commissioner of Internal Revenue before withdrawal of any deposit; that unable to convince the Court of the legality and reasonableness of its request for the administrators to first secure a clearance from the BIR prior to the release of the funds, Citibank was thus compelled to file a Petition for Certiorari (With Application fox a Writ of Preliminary Injunction and Temporary Restraining Order) with the Court of Appeals on December 19, 2002; that however, on December 23, 2002, Citibank received the Order dated December 23, 2002 from the Court citing two (2) of its officers in contempt of court for failure to comply with its Order dated November 22, 2002; that immediately after the holidays or on December 26, 2002, Citibank again received from the administrator of the estate of Jose T. Pion a Motion for Transfer of Funds from Citibank (Libis Branch) to Landbank (Aroceros Branch); that the said Motion was set for hearing on January 3, 2003; that during the January 3, 2003 hearing, the Court granted the motion and on the same day issued an Order directing Citibank to release the amount of P1,000,000.00 and transfer the same to Landbank; that said Order dated January 3, 2003 likewise required Citibank to write the BIR Commissioner to the effect that Citibank cannot but release the amount by virtue of the Order; that constrained to comply with the Orders dated November 22, 2002, December 23, 2002 and January 3, 2003, Citibank released the amount of P1,000,000.00 in favor of the administrators of the estate of the deceased Jose T. Pion. TAacHE In reply thereto, please be informed that pursuant to Section 97 of the Tax Code of 1997, the pertinent portion of which reads "xxx xxx xxx "If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this title have been paid; . . .." a bank, like Citibank, which has knowledge of the death of its client-person shall not allow any withdrawal from the deposit account of said deceased person unless the Commissioner of Internal Revenue has certified that the estate taxes have been paid. In the light of the Order dated January 3, 2003 issued by the Regional Trial Court, Branch 49, Manila directing Citibank to release the amount of P1,000,000.00 for transfer to an account of the estate of the late Mr. Jose T. Pion in Landbank-Aroceros branch, this Office shall not interpose any objection to such release and transfer of said amount from Citibank to an account to be opened by the Administrator for the benefit of the Estate of the late Jose T. Pion with Landbank, Aroceros Branch. This however, shall not preclude the BIR from conducting any investigation and/or further assessing, if necessary, whether the estate tax has been paid. Accordingly, this Office hereby authorizes Citibank to allow the transfer of funds, from the deposit account of the deceased Jose T. Pion pursuant to a lawful order of RTC Branch 49 of the City of Manila in Special Proceedings No. 02-104387 entitled "In Re: Settlement of the Intestate Estate of Jose "Pepito" T. Pion", to the Landbank, Aroceros Branch. However, this Office cannot as yet issue the necessary Certification unless the administrator of the estate of Jose T. Pion can show proof that the corresponding estate tax due on the transmission of the said estate to the heirs of the late Jose T. Pion has been paid pursuant to Section 91 of the Tax Code of 1997. ( BIR Ruling No. 028-2001 dated July 12, 2001 ) WHEREFORE, Citibank and the Landbank of Aroceros Branch shall not allow any withdrawals and/or distribution of the said funds without the necessary tax clearance that the estate tax due on the transmission of the estate of the late Jose T. Pion has been fully paid. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group